10-QPeriod: Q1 FY2020

CARDINAL HEALTH INC Quarterly Report for Q1 Ended Sep 30, 2019

Filed November 7, 2019For Securities:CAH

Summary

Cardinal Health Inc. (CAH) reported its first quarter fiscal year 2020 results, marked by a significant GAAP operating loss of $5.3 billion. This loss was primarily driven by a substantial $5.63 billion pre-tax charge related to an estimated liability for opioid lawsuits and claims. Despite this GAAP loss, the company reported a 6% increase in non-GAAP operating earnings to $577 million, driven by cost-saving measures and growth in its distribution and services businesses. Revenue saw a 6% increase to $37.3 billion, largely due to strong performance in pharmaceutical distribution and specialty pharmaceutical customers. Key financial highlights include a decrease in cash and equivalents from $2.5 billion to $1.2 billion, attributed to operational cash usage and significant share repurchases. The company also announced an agreement in principle for a global settlement framework to resolve opioid lawsuits with states and political subdivisions, involving a cash component of up to $5.56 billion over eighteen years. While the GAAP results were heavily impacted by the opioid litigation accrual, the underlying operational performance, as reflected in non-GAAP metrics, showed resilience and growth.

Financial Highlights

47 data points
Beta

Revenue

$37.34B

4.5% Gross Margin

Net Income

-$4.92B

-13.2% Net Margin

EPS (Diluted)

$-16.65

Total Assets

$39.18B

Cash & Equivalents

$1.21B

Free Cash Flow

-$725.00M

Financial Statements
Beta
Revenue$37.34B
Cost of Revenue$35.66B
Gross Profit$1.68B
SG&A Expenses$1.11B
Operating Income-$5.26B
Interest Expense$66.00M
Net Income-$4.92B
EPS (Basic)$-16.65
EPS (Diluted)$-16.65
Shares Outstanding (Basic)296.00M
Shares Outstanding (Diluted)296.00M

Key Highlights

  • 1Reported a GAAP operating loss of $5.3 billion, primarily due to a $5.63 billion pre-tax charge for opioid litigation.
  • 2Non-GAAP operating earnings increased by 6% to $577 million, driven by cost savings and growth in distribution and services.
  • 3Total revenue increased by 6% to $37.3 billion, supported by pharmaceutical distribution and specialty pharmaceutical customer growth.
  • 4Agreed in principle to a global settlement framework for opioid lawsuits, with a cash component of up to $5.56 billion over 18 years.
  • 5Cash and equivalents decreased to $1.2 billion from $2.5 billion, impacted by $653 million in net cash used in operating activities and $350 million in share repurchases.
  • 6Medical segment profit increased by 26% to $170 million.
  • 7Non-GAAP diluted EPS decreased by 2% to $1.27 per share.

Frequently Asked Questions

The primary driver of the $5.3 billion GAAP operating loss was a $5.63 billion pre-tax charge recognized for the estimated liability associated with lawsuits and claims related to the distribution of prescription opioid pain medications. This charge is part of an agreement in principle for a global settlement framework.

Total revenue increased by 6% to $37.3 billion for the three months ended September 30, 2019. This growth was primarily fueled by sales increases in the pharmaceutical distribution and specialty pharmaceutical customer segments.

Cardinal Health agreed in principle to a settlement framework that includes a cash component of up to $5.56 billion to be paid over eighteen years. A pre-tax charge of $5.63 billion was recorded in the quarter to reflect this estimated liability. The company is unable to estimate the liability associated with potential treatment medication distribution or program changes.

Net cash used in operating activities was $653 million for the quarter, leading to a decrease in cash and equivalents from $2.5 billion to $1.2 billion. This was also influenced by $350 million used for share repurchases and $146 million for dividends. The company expects improved operating cash flow in the next quarter due to anticipated working capital improvements.